Today at McGill, Professor Kim Brooks will present her current work in progress as the final speaker of the 2017 tax policy colloquium at McGill Law. Here is the abstract:The new millennium has inspired renewed interest in comparative law generally and comparative tax law in particular, with practitioners and scholars rapidly building the literature that defines the modern field. Despite the increase in authors undertaking comparative tax work, however, the contours of the theoretical and methodological debates lack definition; despite several leading articles that call on scholars to actively engage with each other on matters of approach, most scholars continue to “write alone”; and despite the increasing availability of thoughtful comparative law textbooks and monographs, tax scholars do not connect their work with debates in comparative law generally.In this paper, I provide a foundation for future comparative tax law research. Part 1 reviews the major debates and theoretical directions in comparative law scholarship, focusing on the recent work in the field. Part 2 offers an intellectual history of comparative tax law scholarship, identifying the major contributors to the discipline of comparative tax law and conceptualizing the field’s development in five stages. Finally, Part 3 generates a taxonomy of modern comparative tax law research based on itsunderlying purpose, explores how that work connects to the comparative law field, and identifies approaches to comparative tax law method, in the light of the work to date, that best advance tax knowledge.

The tax policy colloquium at McGill is supported by a grant made by the law firm Spiegel Sohmer, Inc., for the purpose of fostering an academic community in which learning and scholarship may flourish.

The land on which we gather is the traditional territory of the Kanien’keha:ka (Mohawk), a place which has long served as a site of meeting and exchange amongst nations.

This fall, in celebration of the centennial anniversary of the introduction of federal income taxation in Canada, the Colloquium focuses on the historical significance and development, as well as the most recent challenges, of the modern tax system in Canada and around the world.

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Today, Ajay Mehrotra, Northwestern University and the American Bar Foundation, will present "The VAT Laggard: A Comparative History of U.S. Resistance to the Value-Added Tax, as part of the annual Spiegel Sohmer Tax Policy Colloquium at McGill Law. This is a fascinating topic as the United States considers major tax reform without explicitly embracing VAT as much of the rest of the world has done. Prof. Mehrotra's new project will explore the U.S. position in light of how Canada, Japan, and other jurisdictions were able to overcome historical resistance to a national VAT by adopting a Goods and Services Tax (GST).

The tax policy colloquium at McGill is supported by a grant made by the law firm Spiegel Sohmer, Inc., for the purpose of fostering an academic community in which learning and scholarship may flourish.

The land on which we gather is the traditional territory of the Kanien’keha:ka (Mohawk), a place which has long served as a site of meeting and exchange amongst nations.

This fall, in celebration of the centennial anniversary of the introduction of federal income taxation in Canada, the Colloquium focuses on the historical significance and development, as well as the most recent challenges, of the modern tax system in Canada and around the world. The complete colloquium schedule is here.

The tax policy colloquium at McGill is supported by a grant made by the law firm Spiegel Sohmer, Inc., for the purpose of fostering an academic community in which learning and scholarship may flourish.

The land on which we gather is the traditional territory of the Kanien’keha:ka (Mohawk), a place which has long served as a site of meeting and exchange amongst nations.

This fall, in celebration of the centennial anniversary of the introduction of federal income taxation in Canada, the Colloquium focuses on the historical significance and development, as well as the most recent challenges, of the modern tax system in Canada and around the world. The complete colloquium schedule is here.

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On Monday October 23, Amir Pichhadze, Lecturer at Deakin University, Australia, will present his work in progress, entitled "Canada’s Federal Income Tax Act: the need for a principle (policy) based approach to legislative (re)drafting of Canada’s transfer pricing rule" as part of the annual Spiegel Sohmer Tax Policy Colloquium at McGill Law.

Pichhadze's new paper builds on his prior work with Reuven Avi-Yonah on GAARs and the nexus between statutory interpretation and legislative drafting and draws on insights from Judith Freedman's work on the topic of legislative intention in statutory interpretation. The working draft explores the evolution of arm's length transfer pricing in Canada and makes the case for Canada’s parliament to adopt and apply a more explicit principle/policy-based approach to legislative drafting. It argues that Canada’s courts cannot effectively distill relevant policies and principles unless they are clearly conveyed by parliament, using Australia's experience as relevant and constructive.The tax policy colloquium at
McGill is supported by a grant made by the law firm Spiegel
Sohmer, Inc., for the purpose of fostering an academic community in which
learning and scholarship may flourish.

The land on which we gather is the traditional territory of the Kanien’keha:ka (Mohawk), a place which has long served as a site of meeting and exchange amongst nations.

This fall, in celebration of the
centennial anniversary of the introduction of federal income taxation in
Canada, the Colloquium focuses on the historical significance and
development, as well as the most recent challenges, of the modern tax system in
Canada and around the world. The complete colloquium schedule is here.

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2017 marks the 100th
anniversary of Canada’s federal income tax. In commemoration of this milestone,
a half-day symposium will be conducted in conjunction with the Spiegel Sohmer
Colloquium on 2 October 2017. The goal of this symposium is to explore the evolution of tax law and policy in Canada over
the past century. The symposium will feature a keynote by Kim Brooks followed
by two roundtable discussions in which experts confer on some of the key themes
of tax law and policy development in Canada. The symposium will conclude with a
cocktail reception to celebrate 100 years of federal income tax in Canada.

Symposium
Participants:

Kim Brooks, Professor of Law, Dalhousie University.
Prof. Brooks is an internationally recognized tax scholar who has written
multiple scholarly works on taxation in Canada and beyond.

Jakub Adamski,
lecturer in business associations and contract law at McGill Faculty of Law. He runs a seminar on the
history and development of corporate law with Marc Barbeau, with whom he is co-authoring a text
on the subject.

Marc Barbeau, adjunct professor of corporate and securities law at
McGill Faculty of Law and partner, Stikeman Elliott. Me. Barbeau practices in the areas
of mergers and acquisitions, complex reorganizations and corporate governance.
He runs a seminar on the history and development of corporate law with Jakub Adamski, with whom he is
co-authoring a text on the subject.

Scott
Wilkie, partner, Blake’s, and Distinguished Professor of Practice at Osgoode
Hall Law School, York University. Mr. Wilkie is recognized as a leading
corporate tax lawyer in Canada and has extensive experience in national and
international corporate tax practice.

Colin Campbell, Associate Professor, University of
Western Ontario. Prof. Campbell was a senior partner in the Toronto office of
Davies Ward Phillips & Vineberg LLP until mid-2010 when he took up a
position at UWO to teach and undertake research on Canadian tax history.

Lyne Latulippe, Professeure agrégée, École de gestion, Université de Sherbrooke. Prof.
Latulippe’s work on the institutional aspects of international taxation development
and the conduct of professional tax advisors is widely recognized and
influential.

Robert Raizenne, adjunct professor of tax law at McGill Faculty of Law and partner, Osler, Hoskin & Harcourt
LLP. Me. Raizenne has extensive experience in a wide variety of tax matters and
is a sought-after speaker and writer on national and international tax topics.

The aim of this article is to examine the differences in perception of ‘fairness’ between developing and developed countries, which influence developing countries’ willingness to embrace the Base Erosion and Profit Shifting (BEPS) proposals and to recommend as to how to overcome these differences. The article provides an introduction to the background of the OECD’s BEPS initiatives (Action Plan, Low Income Countries Report, Multilateral Framework, Inclusive Framework) and the concerns of developing countries about their ability to implement BEPS (Section 1); a non-exhaustive overview of the shortcomings of the BEPS Project and its Action Plan in respect of developing countries (Section 2); arguments on why developing countries might perceive fairness in relation to corporate income taxes differently from developed countries (Section 3); and recommendations for international organisations, governments and academic researchers on where fairness in respect of developing countries should be more properly addressed (Section 4).

This is an important analysis because it is clear that the meaningful participation of non-OECD countries in the development of international tax norms going forward is both difficult and imperative in terms of both legitimacy and effectiveness of the evolving international tax order.

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2017 marks the centennial of Canada's federal income tax, so it is appropriate that this year’s tax policy colloquium at McGill Law will focus on the theme of 100 Years of Tax Law in Canada. The colloquium is made possible by a grant from Spiegel Sohmer. The land on which we gather is the traditional territory of the Kanien’keha:ka (Mohawk), a place which has long served as a site of meeting and exchange amongst nations.

The distinguished speakers who will contribute to this year’s colloquium include:

Kim Brooks, Professor of Law, Dalhousie University. Former Dean, Dalhousie Law, Prof. Brooks is an internationally recognized tax scholar. On October 2, she will present a keynote and take part in a half-day symposium on the history of tax law in Canada.

Amir Pichhadze, Lecturer, Deakin University, Australia. Prof. Pichhadze is an emerging scholar who studied comparative tax law in the U.S. and U.K. and completed a Judicial Clerkship at the Tax Court of Canada. On October 23, he will present work in progress on the development of value added taxes in Canada, the U.K., and the U.S.

Ajay Mehrotra, Executive Director and Research Professor, American Bar Foundation, and Professor of Law, Northwestern University. Professor Mehrotra is a leading voice on tax history in North America who has studied various aspects of interrelationships and influences in Canadian and U.S. tax law history. On November 20, he will present a work in progress on intersecting developments in Canadian and U.S. tax law history.

Ashley Stacey, Associate, Olthuis, Kleer, Townshend. Ms. Stacey is a junior associate whose practice is focused on advising First Nations and First Nation-owned businesses on corporate and commercial transactions and who blogs at oktlaw.com on tax and governance issues relevant to First Nations communities. On December 4, Ms. Stacey will present her work in progress on historical and contemporary intersections of taxation, sovereignty, and autonomy of First Nations in Canada.

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Kluwer law has recently published Tax Sovereignty in the BEPS Era, a collection of contributions I co-edited with Sergio Rocha, in which we and a slate of authors from a range of countries explore the impact of the BEPS initiative on "tax sovereignty"--which I take to mean the autonomy that nations seek to exercise over tax policy. Here is the description:

Tax Sovereignty in the BEPS Era focuses on how national tax sovereignty has been impacted by recent developments in international taxation, notably following the OECD/G-20 Base Erosion and Profit Shifting (BEPS) Project. The power of a country to freely design its tax system is generally understood to be an integral feature of sovereignty. However, as an inevitable result of globalization and income mobility, one country’s exercise of tax sovereignty often overlaps, interferes with or even impedes that of another. In this collection of chapters, internationally respected practitioners and academics reveal how the OECD’s BEPS initiative, although a major step in the right direction, is insufficient in resolving the tax sovereignty paradox. Each contribution deals with different facets of a single topic: How tax sovereignty is shaped in a post-BEPS world.

CH 11; How Are We Doing with BEPS Recommendations in the EU?, Tomas Balco & Xeniya Yeroshenko

CH 12: U.S. Tax Sovereignty and the BEPS Project, Tracy A. Kaye

And finally, here is a brief description:

The book unfolds in three parts.
The first, The Essential Paradox of Tax Sovereignty, features four chapters.

In chapter 1, Christians introduces the topic by demonstrating how BEPS arose from the paradox of tax sovereignty and analyzing why multilateral cooperation and soft law consensus became the preferred solutions to a loss of autonomy over national tax policy. The chapter concludes that without meaningful multilateralism in the development of global tax norms, the paradox of tax sovereignty will necessarily continue and worsen, preventing resolution of identified problems for the foreseeable future.

Tomazela &; Rocha pick up this thread in chapter 2, where they demonstrate that BEPS addresses the symptoms, but not the problems, of the sovereignty paradox. In their view, the central defining problem of this paradox is an ill-defined jurisdiction concept. The chapter demonstrates why tax policymakers need to change the conventional wisdom on sovereignty in order to incorporate new nexus connections due to the changing nature of trade and commerce.

In chapter 3, Schoueri & Galendi further the inquiry by providing a detailed analysis of the interaction of contemporary cooperation efforts with the sovereignty of states in light of historical claims in economic allegiance, economic neutrality and now cooperation against abusive behaviour.

Brauner rounds out this first part in chapter 4, which establishes the evolution of the concept of tax sovereignty. The chapter proposes an instrumental role for sovereignty in the process of improving cooperation and coordination of tax policies among productive (non-tax haven) countries, to balance claims and serve as a safeguard against political (in this case international) chaos. Brauner concludes that such a change to the business of international tax law would ensure at least an opportunity for all participants to succeed on their own terms.

Part Two of the book, Challenge to the Foundational Principles of Source and Residence, takes an in depth look at why residence and source continue to be the two essential building blocks of tax sovereignty and the backbone of the international tax system, surviving BEPS but still subject to multiple challenges in theory and practice.

In chapter 5, Avi-Yonah & Xu argue that BEPS simply cannot succeed in solving the sovereignty paradox because BEPS follows the flawed theory of the benefits principle in assigning the jurisdiction to tax. Avi-Yonah and Xu therefore make a compelling argument that for the international tax regime to flourish in the face of sovereign and autonomous states, countries must commit to full residence-based taxation of active income with a foreign tax credit granted for source-based taxation.

In chapter 6, Tejeiro continues the analysis of the fundamental jurisdictional building blocks, demonstrating that by resorting to legal fictions within BEPS and beyond it, states are attempting to enlarge the scope of their personal or economic nexus, or to grasp taxable events and bases beyond their proper reach under well-settled international law rules and principles.

Bal furthers the discussion in chapter 7, with an analysis of how digital commerce has upended traditional notions of source and residence. Bal advocates the consumer's usual residence as a good approximation of the place of actual consumption and therefore the best-justified place of taxation.

Part Three of the book, Acceptance and Implementation by Differently-Situated States, considers tax sovereignty after BEPS from a range of perspectives. Chapters 8 through 10 focus on perspectives from lower income or developing countries, while chapters 11 and 12 review the landscape from the perspective of Europe and the United States, respectively.

In chapter 8, Quinones explores how developing countries might take advantage of the new international tax architecture, developed for purposes of coordinating the BEPS action plans, to ensure that their voices are truly shaping the standards. She argues that the knowledge gap between developing and developed is getting narrower instead of wider, with major negative impacts expected for the international tax order.

Rocha continues this discussion in chapter 9, with a proposal: instead of simply accepting the BEPS Project’s recommendations and their reliance on historical decisions about what constitutes a country’s “fair share of tax”, developing countries should join in the formation of a Developing Countries’ International Tax Regime to focus discourse on the rightful limits of states’ taxing powers.

Furthering the theme of autonomous priority-setting, in chapter 10 Tavares focuses in on a key part of the BEPS consensus, exploring whether implementing the CBCR standard, without a deeper transfer pricing reform, should be viewed as a priority in every country. He further questions whether this particular initiative, even if important, is worthy of mobilization of the scarce resources of developing countries. Tavares concludes with an incisive review of the role of the inclusive framework in prioritizing some needs over others.

Balco & Yeroshenko then consider BEPS implementation from the very different perspective of the EU in chapter 11. The chapter demonstrates that even within the EU, BEPS implementation is not straightforward, as the interests of member states sometimes conflict and the basic notion of tax sovereignty remains fundamental even while tax coordination and harmonization across the EU expands. However, the authors note that the progress made in the last several years on key cooperation norms, which was largely inspired by BEPS, has been unprecedented.

Finally, Kaye provides a capstone to the book in chapter 12, where she makes the convincing case that although some in the United States saw the BEPS Project as a threat to US tax sovereignty, this project was in fact necessary in order for the United States to effectively wield its tax sovereignty. Kaye’s chapter thus ends the book with a clear picture of the ongoing paradox of tax sovereignty in the world after BEPS.

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Hans Gribnau and Henk Vording recently posted an interesting paper on SSRN. Here is the introduction:

The academic discipline of tax law as we know it today has its roots in the late nineteenth century. In the Netherlands, it emerged out of a confrontation between (predominantly British) classical political economy and German Staatslehre (theory of the state). This contribution analyses the impact of the relevant ideas on Dutch theorizing about taxes. It is argued that tax law as a legal discipline is heavily indebted to the German tradition. This may help to explain why it has proven difficult to develop meaningful communication between tax lawyers and tax economists.

The paper focuses on the development of tax doctrine in the
Netherlands over the nineteenth century, but the paper's thoughtful analysis of the evolution of tax goals and priorities, the conceptualization of the taxpayer-state relationship, the complex interaction on tax policy of political and economic theory, and the impact of rule of law theory on tax policy are of general interest.

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Further to my last post on the newly released Tax Gap study by the Canada Revenue Agency, the following comes from guest blogger Iain Campbell (ARC, UK):

I hope this
comment is not too long but I’ve been following Tax Gap discussions for so long
that it’s hard to pass by the chance to comment!

Background

This is an
interesting development. Writing from the UK I’m not in regular contact with
developments in Canadian tax administration. But I do recall there has been
some entertainment over the Tax Gap, with the Parliamentary Budget Officer asking
for the CRA to do some work on it - and being rebuffed.

In fact, the CRA
has not been keen on preparing a Tax Gap analysis. In 2002 it reported that attempting
to estimate overall levels of reporting non-compliance such as the ‘tax gap’ or
the total amount of smuggling activity was fraught with difficulty. (CRCA
Performance report
for the period ending 31 March 2002.) Ten years later the CRA were still not
convinced. At the start of 2013 they told the PBO:

The CRA later pointed
out “the significant debate about the precision, accuracy and utility of any
methodology to calculate the tax gap”. It drew attention to critical comments
from the UK Treasury Select Committee, as well as the fact of 52 tax
administrations surveyed by the IRS, 33 did not produce one, and the high costs of doing so. (CRA, PBO
Information Request
IR0102: tax gap estimates, letter 20 March 2013,] and PBO Information Request
IR0102: tax gap estimates, letter 1 August 2013.) In 2014 the PBO even
threatened to take legal
action in order to compel production.

But in the
recent election there was a promise to undertake such a study, ending this long
standing reluctance to follow the example of other countries, including the
USA and UK. And following the Panama
Papers the Revenue Minister said in January a tax gap study would be done.
The new Canadian study comprises a 31pp paper on a conceptual study of the
Canadian tax gap and an 11pp study on the Canadian GST/HST, which gives a gap
of 5.5% in 2000 and 6.5% in 2014. (It explicitly references the decision
announced by the Minister of National on 11 April.)

Basis of study – what’s in and what’s out

The conceptual
study does, to an outsider, seem to spend a lot of time in not saying a great
deal. It seems to add qualification to qualification, caveat after caveat, so
that at times I wondered if the CRA really wanted to publish anything at all. Gus
O’Donnell is the UK civil servant who wrote the Report that led to the UK Customs
and Excise combining with the Inland Revenue to form HM Revenue and Customs. In
that Report he surely got it down to a few words: “Making estimates of the tax
gap is methodologically and empirically difficult, although easier for indirect
taxes where tax can typically be related to consumption. Direct tax gaps are
particularly difficult to estimate because the aggregate figures for income,
for example, are built on tax data.”

The CRA's conceptual
study refers a lot to the HMRC papers and policies on calculating the Tax Gap.
But in some of the key areas it dances around what might be difficult decisions
e.g., whether to report the gross tax gap, or, as in the UK, the gap after
action to tackle non-compliance.

Avoidance

More
controversially, the UK includes tax avoidance. This is a good illustration of its overall
approach.

On the other
hand, academics and members of the accountancy profession have argued the
opposite, that any estimate should not include avoidance as referenced by the
“spirit of the law”. For example, during a Treasury Select Committee Hearing on
TheAdministration
and Effectiveness of HMRC, Judith
Freedman (Professor of Tax Law, Oxford University) commented “I really take
issue with the spirit of the law part, because either you have law or you don’t
have law and the law has to state what it is.”

The Canadian
paper discusses this option and concludes “the appropriate treatment of tax
avoidance is less clear”. It seems Canada has decided to not include avoidance
in its definition: “In general the CRA’s approach to the tax gap encompasses
non-compliance related to non-filing, non-registration (in the case of
GST/HST), errors, under-payment, non-payment, and unlawful tax evasion” (p29).There seems to be no explicit position on
avoidance but, although I doubt it will happen, “under-payment” is potentially
broad enough to include under-payment via avoidance.

Other “Gaps”

Another area the
study did not address is what the IMF and EU call the “tax policy gap”. I agree
with this decision (which mirrors the UK). The IMF would widen the definition
and use of the Tax Gap approach. It suggests including the effects of policy
choices that lead to reduced revenues. In a study
on the UK Tax Gap it refers to the impact of compliance issues on revenue as
“the compliance gap” and the revenue loss attributable to provisions in tax
laws that allow an exemption, a special credit, a preferential rate of tax, or
a deferral of tax liability, as the “policy gap” (para 68). As part of this they recommend tax avoidance
schemes deemed legal through litigation should be considered part of the policy
gap, not the compliance gap, and this distinction should be made clear.

A similar point
was made by an EU report
on VAT. They suggested that a possible link between
the policy and the compliance gaps, since using the reliefs and allowances
intended by policy could make compliance more difficult. “Reducing the policy
gap may often be the simplest and most effective way to reduce the compliance
gap. “ (p21)

In my view these
kinds of proposals are likely to be very complex, perhaps contentious, and hard
to administer. It seems a sensible decision to not refer to them or suggest
their inclusion.

Then there are
the base erosion issues where tax is avoided through the use of legal
structures that make use of mismatches between domestic and international tax,
e.g. permanent establishments. The Canadian study nods in the direction of BEPS
and then passes by.

What’s the point of working out a Tax Gap?

But putting
aside these sorts of issues, or whether “top-down” targeting is better than “bottom-up”,
does the size of the hidden or “informal” economy predict the level of GST/VAT
underpayment (or is it the other way around?), perhaps thebig $64K question is whether any of this
means anything. If there is no clear agreement on the numbers, how they are
calculated and their reliability, then is there are any point in preparing
them?

The very concept
of the tax gap is not universally agreed to be a useful analytical or strategic
lever. Apart from the earlier Canadian reluctance, the Australians were slow to
go down this road. UK Parliamentarians have been less than keen. In 2012 the
Treasury Select Committee said they thought it was essentially a waste of time
and resources. Worse, they feared it would misdirect HMRC away from ensuring
every taxpayer paid the right amount of tax. Such fears have not died. The
current TSC is examining UK corporation tax. Their early work involved scoping
the problem and they heard some evidence on the tax gap. Andrew Tyrie (the
Chair) seemed less than enthused at the very concept.

I think it has
merits. But it ought not to be elevated to some shibboleth. It is one high-level
measure of how successfully legislation is being applied, use of resources, etc.
The UK Government’s official
position is that that “thinking about the tax gap forces the department to
focus attention on the need to understand how non-compliance occurs and how the
causes can be addressed—whether through tailored assistance, simpler
legislation, redesigned processes or targeted interventions. Measuring the tax
gap helps us to understand whether increasing returns from compliance activity
reflect improved effectiveness or merely a decrease in voluntary compliance.”

The Canadian
paper says broadly the same things (pp22-24). It talks of providing insight
into the overall health of the tax system, of understanding the composition and
scale of non-compliance, but warns of their limitations.

If that is how
it used then I think it is a useful aid to policy making and how robust is the
assurance being provided by the tax administration.